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How to Measure Customer Loyalty. Hint: It Has Nothing To Do With Your CSI Score.

By Mike Esposito, President and CEO, Auto/Mate Dealership Systems

This article appeared in the March issue of Auto Success magazine.

 

If your dealership consistently receives higher-than-average CSI scores, you may believe that a good percentage of your customers are happy and therefore loyal. But you may be wrong. Customer satisfaction and customer loyalty are two completely different things.

 

For example, I am a very loyal customer of Southwest Airlines. I fly Southwest because they don’t charge change or cancellation fees, checked bag fees and they usually get me to where I need to go on time. But I am not always a satisfied customer. Sometimes they are late, I wish they had assigned seating and I wish they didn’t charge for wi-fi. So if I was to fill out a customer satisfaction survey, I may take the opportunity to voice my dissatisfaction and they would think I was not a satisfied customer. But the reality is, I remain a loyal customer and choose to fly Southwest before any other airline.

 

Conversely, I may be very satisfied with a service but not be loyal at all. There’s a nice bookstore not far from where I live. Occasionally while my wife is shopping I drop in for a cup of coffee and to browse through a magazine. If I were to fill out a survey, I would have nothing but nice things to say about the bookstore, so the bookstore manager might think I am a loyal customer. But that would be wrong because I don’t buy my books at that bookstore; I buy all my books online.

 

The CSI may have some use for the manufacturers, but the CSI survey process leaves much to be desired. The surveys are too long with poor response rates, and both sales and service employees game the system for financial incentives. A dealership’s CSI score is a not an accurate representation of customer loyalty and retention.

 

Customer retention rates are more useful to dealers than CSI, but still may not offer an accurate reflection of loyalty. You may have a customer with a number of repeat visits because their vehicle has had a lot of problems; but once the issues are resolved he may not return to purchase a vehicle or for future service visits. Or, you may have a customer with a new vehicle who has not visited the service department yet but who is very loyal.

 

A better, and very simple way to measure customer loyalty is the Net Promoter Score (NPS). Thousands of businesses in the U.S. use the NPS to effectively measure the percentage of their customers who will not only purchase again but also resist pressure to defect to a competitor.

 

Every company’s customers can be divided into three categories: Promoters, Passives, and Detractors. The NPS survey asks one simple question: “How likely is it that you would recommend [your company] to a friend or colleague?”

 

Customers respond on a 0-to-10 point rating scale and are categorized as follows:

 

 

To calculate your company’s NPS, take the percentage of customers who are Promoters and subtract the percentage who are Detractors.

 

For example:

 

In this situation your NPS would be 20 (50%- 30%)

 

Asking one question greatly increases the response rates. You may however, choose to expand the survey by asking one or two other questions. For instance, if a customer scores you an 8 you may want to ask one question: What do we need to do for you to score us a 10?” If a customer gives you a 6 or below you may want to ask them why they gave you that score. The survey is sent to every customer immediately after every transaction, so if there is “detractor” who had a poor customer experience a dealer can take immediate action.

 

Studies have proven that businesses with high NPS scores are more profitable than their competitors. The majority of businesses average an NPS of around 5-10, but extremely profitable companies such as Apple and Harley Davidson have scores in the 50-80 range. The same studies show that companies with more detractors than promoters are more likely to suffer stagnant growth or go out of business.

 

If your goal is to increase customer loyalty and retention, don’t rely on your CSI scores or retention rates; instead, try a NPS survey to get a more accurate picture of how many customers would buy from you again versus how many are actively detracting others from ever visiting you in the first place. The results are more accurate and will be eye-opening.

 

 

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